Archive for January, 2009

Picking a personal finance hero isn’t really that easy.  After all, who would you pick?  Would you pick those responsible for putting the bailout together?  How about someone who sounded the alarm whistles early on about the credit/financial crisis but was ignored?  Perhaps a TV finance personality like Jim Cramer from the “Mad Money” TV show on CNBC?

Better yet, how about that couple that you know who aren’t particularly complicated, but full of common-sense financial wisdom?  They worked and played hard, but they always lived well within their means.  They saved when it wasn’t the most fun they could be having with their money.  They were frugal.  They didn’t buy a BMW or a house with a huge mortgage.  They spent their money wisely and saved smart.  And even today, with the economic downturn, their hard work has paid off.  They remain financially sound.

See, those are the people who should be your personal finance hero.  They not only deserve such credit, but they can help you.  And though I know many of those people, I sit here thinking of someone with those qualities and a bit more influence, someone who not only has pulled herself up from the boot straps but who helps others do the same thing.  For 2008, the person who gets my vote is Suze Orman.  She’s been where the average American is, and through hard work and common sense, she made it.  And she shares her story with just about anyone who will listen. During the last few months, as folks were panic-stricken, Suze appeared on the Oprah show with her no-nonsense style and calmed everyone down.

Though Suze might be my personal finance hero, I urge you to look for your own.  You don’t need to go far.  Look around you.  Look at those people from whom you too can learn.  They have all the characteristics that someone like Suze has.  They work hard, are frugal, live well within their means — and they save.  They check their credit regularly, and they work hard to maintain their good credit standing. Those are the heroes, the everyday folks who make it — even during times like this.

Los Angeles Times consumer columnist David Lazarus wrote about a recent brush with identity theft after someone stole his cash, driver’s license and credit cards from a locked gym locker.

What was so startling about this story was the cool precision with which the thief set about to use the card ⎯ about 30 minutes after it was taken. The thief quickly hit two Toys R Us stores, spending hundreds of dollars at each outlet and another $1,350 at a Best Buy before returning to the same Best Buy for an additional $1,298 purchase. The thief’s next stop was Target, where, thankfully, attempted credit card transactions were declined.

Lazarus notes that cashiers are supposed to compare the signature on the credit card transaction with the signature on the back of the card. That one simple step by an alert employee could’ve prevented the theft. But do you remember when a store clerk actually took the time to check your signature against your card? They just don’t bother anymore.

If you purchase anything with a credit card in the next few days, make a point to see whether the cashier checks your signature, then share your findings with us, please.

Used to be, the average American was said to move once every seven years, most often for a job or to retire.

But now the recession has taken another victim: The ability of many Americans to remain footloose and mobile. According to the New York Times, “domestic migration” has been drastically limited, for two very simple reasons:

1. People can’t sell their homes, especially if they’re upside down on their mortgage.

2. With unemployment rising and employers cutting ⎯ not expanding ⎯ their workforce, there are fewer reasons to move.

So people are staying put, waiting for the day when real estate prices recover and jobs become plentiful once again.

Are you planning on moving in the near future, and if so, has the bad economy affected your plans?

If you’ve had occasion to browse the personal finance book selection at your local Borders recently, you may have noticed a more subdued and serious tone. Titles that used to scream things like “Become a Millionaire by 40!” and “Independently Wealthy: Have it Your Way” have been replaced by more cautious tones like the current best-seller Suze Orman’s 2009 Action Plan: Keeping Your Money Safe & Sound.

The Wall Street Journal picked up on this shift and made mention of a 2006 study by the Journal of Behavioral Finance that revealed “stocks perform substantially better after the publication of bearish financial books than they do after bullish titles are published.”

The bad news bears can be found around every corner these days, so if that study’s got any legs, we should see the light at the end of the tunnel real soon, at least in terms of a stock market turnaround. That could be some solace for those with 401(k)s or other long-term retirement money invested in the stock market.

What’s the latest personal finance book you’ve read?

As we start 2009, I, like other identity theft and credit experts, once again dust off my crystal ball to see what’s in store for us for the year to come.   Here’s what I see regarding credit in 2009:

• Scarce but available credit. That’s right, my crystal ball tells me that 2009 will be a tough year, but you don’t have to be an expert to figure that out.  Many of us either experienced, or know someone who’s had some experience related to, the tightening of credit in the last few months.  When the credit crisis was in full swing, I spoke to the owner of a car dealership who told me that he was probably going to have to lay off half of his staff.  Not only did sales drop because people didn’t want to make such a big purchase, but even those who wanted to couldn’t get a loan approved. In September, October and November, his sales were 40% of what they should have been.  The good news is that the credit crisis has started to lighten up, and it’s expected that things will get better in the second half of 2009.  Credit will still be tighter than what we’re used to seeing, but it will be available to those with excellent and good credit.  For those who have marginal credit, the situation will be more bleak, but they too will find a few options — just not nearly as many as they had prior to the credit crisis.

• Increased interest rates. Credit companies, particularly credit card companies, are hiking rates at any opportunity.  Though you might think that they wouldn’t want to make it more difficult for people to make their payments, it seems as though the losses that credit card companies are taking is driving them to hike rates wherever possible.  Expect more of this in 2009.  If you miss a payment, that great rate you had will be gone; if you go over the limit, same thing.  And if you haven’t had a rate hike in quite a while, well, expect it.  In 2009, chances are you’ll see your rate increase.

• Traditional lending practices return — it’s not a circus anymore. Remember those crazy real estate loans that your friends were getting — nothing down, interest-only payments, etc.?  Well, those days are gone, and I have to be honest, I’m happy about it.  The circus is over, and it’s time to return to a more traditional and reasonable approach.  For those who had some difficulty in making reasonable decisions when it came to selecting acceptable loan terms and ended up buying more house than they could afford — well, help is on the way.  Kind of.  Those types of terms won’t be offered in 2009 and perhaps never again.   Lenders took a little bit of the heat too, and you can expect that lenders will have a more conservative approach in 2009.

Today’s job hunters face incredible challenges. Thousands of positions are slashed every week, making employment competition tougher every day. Everyone needs an edge that will pull him or her ahead of the pack. The first rule of job-hunting is to ensure that you put your best foot forward, on paper and in person. But in addition to presenting an impeccable resume and impressive portfolio, job hunters today have to concern themselves with how their personal lives are portrayed online — information that for many is readily available on multiple websites.

Social networking sites like Facebook and MySpace offer potential employers windows into the private lives of job hunters like never before. Most job counselors would advise you to take down personal pages, as they can only hinder your chances of getting hired. But in an ever-changing economy and working environment, why not use such sites to your advantage?

Here are six ways social networking sites can boost your image, your job opportunities and ultimately your bottom line:

1. Market yourself to employers. Delete any compromising photographs of you and your friends, and tailor your page to portray yourself in a positive light. Maybe that means posting a G-rated photograph of your family on vacation, or an image of you pitching in at the local community service project. Employers prefer well-rounded candidates, so put your many dimensions on display.
2. Make your page an online portfolio. Have you been featured in a news article? Are items you’ve authored or designed available online? Post your online accomplishments on your page so employers can see all you have to offer.
3. Use the “About Me” section for your best sales pitch. Employers don’t need to know how you like to spend your Saturday nights. Instead, treat the “About Me” section as valuable real estate; use it to your advantage. Write a summary of your accomplishments and goals.
4. Inform your friends that you’re on a job hunt. Ask them to refrain from posting objectionable material on your page, or to avoid making public references to your drinking habits.
5. Keep your work and contact information updated. Make yourself as available as possible to employers.
   
6. Join a social networking site dedicated to making career connections. Sites like LinkedIn.com are dedicated to maintaining and expanding business contacts. The site also hosts job listings.

It’s long been said that being a soldier tops the short list of recession-proof jobs. The pay is good, your education is subsidized, and you don’t have to worry about layoffs.

A recent New York Times article noted that military recruiters have seen a surge in applicants since unemployment began rising. For the first time since 2004, all active-duty and reserve forces have met or exceeded recruitment goals, even the Army, which has had trouble in recent years finding applicants due to the high casualty rate in Iraq. In fact, “[Army] recruiters must typically talk to 150 people before finding one person who meets military qualifications and is interested in enlisting,” the story noted.

Applicants include those who lost their jobs (from construction workers to at least one Wall Street equity trader), older potential recruits (the Army raised the age limit to 42 from 35 three years ago to attract more applicants) and college-bound high school graduates who couldn’t get student loans. The Army also accepts a surprising number of applicants with criminal histories.

Although many of those who sign up may appear to be unlikely candidates, the new recruits were motivated by a mix of patriotism and pragmatism. Higher bonuses and the expanded GI bill, which offers more educational benefits, drove many to recruitment offices.

In my hometown, pragmatism appears to be trumping patriotism, as letter-writers parry back and forth in the local newspaper over the possibility of a new, regional Army training center being built there. The Army is eying a prime piece of real estate on the grounds of a former state-owned, campus-like facility for the mentally retarded, which was sold to the town and is now being reconfigured for municipal needs and passive recreation. Townspeople aren’t happy that the Army, as a federal entity, would pay no ongoing property taxes; they’ve also taken issue with the prospect of scores of tanks and other Army vehicles being stored behind a chain-link fence close to park-like grounds where children roller-skate and dog-walkers stroll.

So while many recruits figure a solid paycheck, sign-up bonus and other goodies are worth the risks, especially when job prospects elsewhere are dwindling, taxpayers in town worry they’ll be giving away land for a one-time payment and never recoup much-needed property tax revenue.

The recession has increased financial pressures at every level. While most Congressional leaders realize that addressing the ballooning federal deficit will have to wait until the economy recovers its footing, states are struggling to come up with cash and slash budgets today. (Most states have laws that require a balanced budget.) This, in turn, is putting more pressure on cities and towns across the nation, as well as on every individual who resides within them.

Now more than ever, decisions hinge on dollars. Money is the driving force for both Army recruits and the taxpayers in my hometown, but the difference, of course, is that the hardships faced by taxpayers won’t match the sacrifices of recruits.

I oppose the construction of an Army training center in my town, but in the end, my opinion may not count for much, because the Army doesn’t actually need the town’s approval to move in.  It also scares me that so many people are headed off to war, whether it’s in Iraq or Afghanistan, just to earn a buck.

Is choosing military service based on pay and benefits a reasonable basis for serving our country? Are the people in my hometown being “unpatriotic” for not welcoming the Army with open arms?

Certainly most of us would agree that the thought of bailing out the auto industry is a bit controversial, right?  After all, if they can’t stand on their own two feet, then why should we pay the price?  Quite frankly, I have mixed feelings on this one.  I wonder when enough is enough.  When will the government stop bailing out private business, and what is it that I’m just not getting?  On the surface, at least to me, it seems simple.  These companies are private businesses.  If they don’t have and can’t put together a sustainable business plan, then, hey, let ‘em sink.

Unfortunately, it isn’t so simple.  Imagine for a moment that the Big Three go under.  It could mean huge impacts on an economy already in trouble.   And it trickles down to auto dealers and other in auto-related businesses.  It means the loss of jobs in communities that are already hit hard and perhaps even trouble getting parts for that Dodge Dakota that you just bought a year ago.   So once again, it’s not so cut-and-dried.

So while it’s difficult to say exactly what the auto bailout might mean to us as consumers, we know that it does mean:

• Preservation of jobs. The significant loss of jobs resulting from any of the Big Three going under at this point would further hurt the economy.

• Support of current products. Those of us who own a vehicle from any one of these three manufacturers will likely need support for our product.  We need the dealerships, the parts suppliers, etc., to maintain our vehicles.

While these might not seem like significant reasons to bail out three very large companies, it’s the timing of it all that makes it so important.  A failure of these companies now would drive the already-harsh economic conditions into a much steeper decline.  Most of us would agree, I think, that further substantial hits to the economy need to be avoided if they can be.

Barack Obama’s presidential inauguration understandably overshadowed pretty much everything else in the news for the last week or so.  His presidency represents a stark change from the policies and approaches of the past, both from the perspective of the White House and the perspective of the American people.  This country faces dire, urgent problems, and President Obama’s ascension to the White House offers many people a sense of hope that maybe we can start to address those problems and dig ourselves out of the holes we’re in.

Unfortunately, the concentrated spotlight on Obama meant that even the parting words of then-President George W. Bush got little play in the media.  That’s unfortunate because, as Tom Engelhardt, founder and editor of TomDispatch.com, noted in a recent Tomgram, President Bush dropped a bomb on the media at his final press conference (or “exit interview,” as he termed it).

Take a look at what President Bush said:

“Now, obviously these are very difficult economic times. When people analyze the situation, there will be — this problem started before my presidency, it obviously took place during my presidency. The question facing a President is not when the problem started, but what did you do about it when you recognized the problem. And I readily concede I chunked aside some of my free-market principles when I was told by [my] chief economic advisors that the situation we were facing could be worse than the Great Depression.

“So I’ve told some of my friends who said — you know, who have taken an ideological position on this issue — why did you do what you did? I said, well, if you were sitting there and heard that the depression could be greater than the Great Depression, I hope you would act too, which I did. And we’ve taken extraordinary measures to deal with the frozen credit markets, which have affected the economy.” [emphasis added]

Um … wow.  The leader of this country and the free world was warned by his chief economic advisors that we could be headed for something worse than the Great Depression?  Did you know that?  Did you read about it anywhere?  See it on TV?  Hear it on talk radio?

Yes, Bush and Cheney were virtually booed off the stage at President Obama’s inauguration, and no, his administration didn’t exactly drape itself in glory over the last eight years.  Still, when Oval Office discussions start centering on economic conditions that could make the Great Depression seem favorable by comparison, shouldn’t that be brought to the attention of the American public?  And don’t we have a right to know whatever it was that caused Bush to “chunk aside” his “free-market principles”?

For a detailed analysis of what this may mean to all of us, I recommend that you read Mr. Engelhardt’s Tomgram in full.

One hundred million or more MasterCard and Visa cardholders may have had their personal information compromised in the latest security data breach by payment processor Heartland Payment Systems.

The firm’s payment processing platform handles about 100 million transactions a month for 250,000 businesses. The source of the breach, undiscovered until last week, was apparently in place for a while; fraudulent activity reports by MasterCard and Visa began showing up late last year on cards that were used at Heartland’s client/merchants to process payments. About 40% of Heartland’s clients are small- and mid-sized restaurants.

The source of the breach was malicious software that surreptitiously collected customer data as it was sent for processing to Heartland by the company’s retail clients. The stolen data include names, credit and debit card numbers and expiration dates.

But then, there’s a good chance you haven’t heard about this because Heartland’s announcement of the breach, the largest in history, was released on January 20, a day when most people were focused on the presidential inauguration. Some suggest the timing of the announcement was no accident.

What’s more galling, though, is that Heartland President Robert Baldwin said it wasn’t “appropriate” for the company to offer consumers identity theft protection services because only names, credit/debit card account numbers and their expiration dates were lifted. Without addresses, he said, it would be difficult to fashion counterfeit credit cards without that information. According to Baldwin,

“In this case, the amount of information we know they did not get is long enough that except in very circumscribed cases identity theft is just not possible. At the same time, we recognize and feel badly about the inconvenience this is going to cause consumers.”

Maybe what Mr. Baldwin is really concerned about is the inconvenience of providing free identity theft protection monitoring services to roughly one-third of the U.S. population.